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Pensions Bill

As my noble friend has said, Amendment No. 130EW is immensely wide. It does not have within it any great restrictions on how these powers may be used. That is why I am so concerned about whether we are legislating in the right way. It is not that the Government say that they will use these powers in an unacceptable way, but that the Bill will allow them to do so. We took a good deal of trouble in the 2004 Act to get the relationship between the pension fund and the company funding it right. That is in danger of being substantially disturbed. It is not what the Minister is saying, but how the Bill can be read and used. The Minister knows that affirmative resolution is all very well but, at the end of the day, it is not an effective check on the Executive. The occasions when we, let alone the Commons, will throw an order back at the Government are extremely rare. The Government have made no attempt today to set out the necessity for having these powers now. I have heard nothing from them to say that some impending crisis can be dealt with in no other way. I have heard nothing from them to say that the regulator’s powers have been tested and found wanting. I believe that I have not heard these things because neither of them are true; this is just the Government looking ahead and anticipating developments. In that case, surely we have plenty of time to talk. We certainly do not need to rush at this before coming to Report. We can use the Summer Recess to talk these things through carefully and get them right. If we pass legislation like this, we have to ensure that we allow commercial life to keep running. The scope of the Bill is undefined and it is retroactive. It seems reasonable to me—I do not argue with the idea—that the provisions apply back to April this year, when they were announced. However, under the new clause, changes could be made in 10 years’ time which will still work back to April this year. It would introduce enormous uncertainty into commercial transactions if the rules on which those transactions are based could be rewritten at any time from now on. The clearance statement for a transaction done in a month’s time could be torn up because the rules on which it is based can be changed. Anything could be done if it is in the interests of the relevant pension fund. We need to focus on the status—we faced this dilemma in 2004—of the pension fund liabilities. Are we really saying that the full buy-out liability should be on a company’s balance sheet; in other words, that it must recognise the full pension fund creditor and treat that as the fixed amount which it owes and the amount which belongs to the pension fund? That seems the way we are going with all this legislation. Or are we still attached to the idea that there is a genuine working relationship between a pension fund and its company, and that the pension fund is in effect saying, ““We are trusting you with some of our money. There is a commercial relationship there because we hope to do much better by letting you have the money than we could by pitching the company into receivership and just getting what we could under those circumstances””? If the second scenario is the case, we have to allow for that relationship to be solid and well based. We cannot look to rewrite the consequences of properly advised actions taken in good faith, given the circumstances that prevailed at the time. Over the weekend I looked at the accounts of one of our larger building companies, which has more than £1 billion worth of unfunded pension liabilities. The stock market was very optimistic in assigning it a net worth of a few hundred million pounds. Under those circumstances, the pension fund is clearly a key player in the refinancing of that company. You cannot not look at a liability of that size. Under the 2004 Act it was quite simple: you went along to the Pensions Regulator with the trustees, cut a deal and came out with something undoubtedly more favourable to the pension fund than it would have been before we had a Pensions Regulator, but which was none the less reasonable and sane and could be relied upon because it would then form the basis of a clearance statement. However, if you do not have that certainty, if you are looking at putting half a billion pounds into the company to keep it going, and the pension fund says, ““That is fine. We would like £100 million of that to up our security, but in the circumstances that is enough””, and then three months later the Government can say, ““Oh no, we will tear up those rules. We will write our regulations differently, and, actually the pension fund now wants another £400 million””, it makes it impossible to do the deal. Faced with the lack of definition in this amendment, I fully understand why people are extremely reluctant to rescue companies in such a state. We have seen in the financial news how slowly rescues are proceeding for some companies that are in the first wave of those to get into difficulties. At the moment we are seeing only the major contractors being hit, but this will run down to the sub-contractors and then it will run out to other industries. Many companies will find themselves in this position and people will want—for, I should have thought, sensible reasons—to find ways to maintain them as going concerns and to save them. If we are to do that, we have to be certain of the pension fund’s position. The government amendment destroys that, particularly because it allows retroactivity but also because it destroys the concept of good faith. Look at a building company that has frankly felt pretty prosperous till this year, has presumably paid good dividends, and might even have paid money back to shareholders at one stage or another. All those things will be revisited. Unless you have the good-faith defence, they will all be taken apart. All the directors will become personally liable. People who have bought businesses from those companies for fair value will find that they are suddenly landed with contribution notices; at least, that is the way the amendment can be read. Matters have been run far too widely. If we want to preserve the companies as anything other than moribund, unfundable entities, we have to allow scope for a proper commercial compromise to be reached between the pension fund and those who are interested in putting money into a company that can be stood by. That seems the essence of what I am asking for, although my later amendments go into rather more detail. However, as I said, we have time to go through this. There is no need to rush. The long Summer Recess allows us some scope to think through these things carefully, and for them to be discussed and got right, particularly with those who are involved in rescuing companies in difficulties. We ought to take advantage of that and not rush into the government amendment now.